US Federal Reserve keeps key interest rate unchanged again

Dubai: The US Federal Reserve held its benchmark interest rate steady for a fourth consecutive meeting, while penciling in two rate cuts later this year.

In its statement, the Federal Open Market Committee (FOMC) voted unanimously to keep the central bank’s key lending rate in the range of 4.25% to 4.50%.

However, the central bank forecasted higher US inflation and cooler growth this year while President Donald Trump's tariffs begin to take hold and geopolitical uncertainty looms. It said in a statement that "uncertainty about the economic outlook has diminished but remains elevated."

Ahead of the decision, the central bank was largely expected to keep its benchmark rate steady, with traders' attention shifts to potential details or signs on how many interest rate cuts are forecasted for this year.

It has been widely expected that the 19 Fed officials that participate in the central bank's interest-rate decisions will project two rate cuts for this year, as they did in December and March. But some economists expect that one or both of those cuts could be pushed back to 2026.

Fed officials see inflation, according to its preferred measure, rising to 3% by the end of this year, from 2.1% in April. It also projects the unemployment rate will rise to 4.5%, from 4.2% currently. Growth is expected to slow to just 1.4% this year, down from 2.5% last year.

Despite the gloomier outlook, Fed chair Jerome Powell and other officials have underscored that they are holding off from any changes to their key rate because of the uncertainty surrounding the impact of the tariffs and economic outlook.

Many of the Fed's policymakers have expressed particular concern that the duties could boost prices, creating another surge of inflation just a couple of years after the worst inflation spike in four decades.

-- With inputs from agencies